Monthly Archives: April 2011

A US diplomatic cable released by Wikileaks details an exchange that took place in October 2009 between Ann Pickard, Royal Dutch Shell’s then-vice president for Sub-Saharan Africa, and US diplomats at the embassy in Abuja, Nigeria. The cable states that, according to Pickard, “Shell had seconded people to all the relevant ministries and that Shell consequently had access to everything that was being done in those ministries.”

And you know, Shell paints itself as a company that takes Corporate Social Responsibility (CSR) quite seriously. They all paint themselves that way, don’t they?

Shell gave money to EWB for our conference last year. One of their people went up on stage and gave a nice talk about how much they care. And then there was a session on CSR jointly hosted by someone from Shell and another person from HATCH, a huge company that services the mining sector. They talked a whole about how much their employers care — how they’re working to “set the bar high” or something of that sort. It was really nice.

Yup.

Nigeria should be a rich country. But it’s not. Instead it has an average life expectancy of less than 50 years.

On the outskirts of Raipur, a massive billboard advertises Vedanta Cancer Hospital. In Orissa, where it is mining bauxite, Vedanta is financing a university. In these creeping, innocuous ways, mining corporations enter our imaginations: the Gentle Giants Who Really Care. It’s called CSR, Corporate Social Responsibility… CSR masks the outrageous economics that underpins the mining sector in India. For example, according to the recent Lokayukta report for Karnataka, for every tonne of iron ore mined by a private company, the government gets a royalty of Rs 27 and the mining company makes Rs 5,000. In the bauxite and aluminium sector, the figures are even worse. We’re talking about daylight robbery to the tune of billions of dollars. Enough to buy elections, governments, judges, newspapers, TV channels, NGOs and aid agencies. What’s the occasional cancer hospital here or there?

Here’s a nice video of Peter Munk, chairman of Barrick Gold, talking about how much he cares:

On account of it being exam session, I didn’t write up a blog post this week. The following is an article that I wrote a couple of months ago. Back then the high food prices were getting a lot of media coverage. The amount of media coverage has waned since then but the prices have not.

Average worldwide food prices are higher today than they were at any time during the 2007-2008 food crisis. In fact, prices have not been higher since Food and Agriculture Organization records began in 1990. With one-seventh of the world’s population already chronically malnourished, this latest development is set to make an already terrible situation much worse. Sugar has seen the most dramatic price increase, almost doubling from June 2010 to the beginning of this year. In that same period, edible oils like palm oil increased in price by an average 65 percent, while the price of cereals rose by 60 percent.[1] The price rises have been attributed to crop failures, subsidies for bio-fuels, high oil prices, and financial speculation.

A contraction in the supply of food has taken place due to harsh weather conditions around the world. Drought has affected food production in Russia, China, and elsewhere, while heavy rains have done the same in Indonesia, Canada, and other countries. Some governments have resorted to measures such as export bans to stabilize prices at home, further leading to the shortening of supply and rise in prices globally.

The continuing use of land to grow crops for bio-fuels rather than for food has also contributed to the supply shortfall. Production of bio-fuels consumes more than 6% of the world‘s grain and 8% of the vegetable oil.[2] The last half-decade has seen bio-fuels obtain a high place amongst alternatives to conventional oil. However, the support they have received, most significantly in the form of subsidies from some governments, is now seen to have been misguided. The competition they create for land that could otherwise be used to grow food is extremely worrying, as is the fact that their “green” credentials have been found to be lacking.

The price of oil has a large impact on the cost of food because the resource is an essential input in the production and transportation of food. The price of crude oil has more than doubled since the beginning of 2009 and is now more than US$100 a barrel.[3]

Supply and demand alone do not explain the spectacular rise in prices. Financial speculation in commodities futures markets is also adding to the food price hikes. Not only are the climbing oil prices attributed in part to speculation, but unprecedented amounts of speculative capital now trades in food as well. Although futures markets are an important tool in facilitating the trade of commodities, speculators not interested in the actual commercial trade of food seem to be overwhelming the markets by injecting massive amounts of liquidity into them.

For the foreseeable future the FAO maintains that food prices will remain vulnerable to dramatic swings. Medium and long term mitigation measures to address the problem will require correcting historical trade injustices between the developed and the developing world, taking away support for bio-fuels, regulating financial markets to restrict non-commercial speculators from taking a large part in them, and providing incentives for farmers to adopt better agricultural practices, such as reducing waterlogging and growing drought resistant crops. Canadian citizens interested in helping improve the situation should focus their energies, in large part, on reforming Canadian policies, such as subsidies to agribusiness and inaction in the face of climate change, which are disallowing poor countries from achieving food self-sufficiency.

Neoliberalism is a doctrine which maintains that unrestricted markets will lead to prosperity. It comes under many labels: the Washington Consensus, economic globalization, structural adjustment, free market fundamentalism, etc. Although its proponents suggest that neoliberal policies should be implemented everywhere for the betterment of all, their own record in this regard discloses a stark hypocrisy. The poor and powerless, in both the South and North, have the “free market” shoved down their throats while the rich and powerful continue to receive increasing amounts of state protection. This is simply a result of the fact that the function of neoliberalism is to serve the interests of those who champion it. It is promoted by them with religious zeal when it serves this purpose, and is easily disregarded when it doesn’t. An honest look at recent history easily reveals this to be the case.

Rich countries continue to intervene in the market while advocating that poor countries do the opposite. The hypocrisy is palpable; those who claim to be neoliberalism’s most ardent supporters are frequently its most consistent repudiators. Noam Chomsky quotes former US Secretary of Treasury James Baker as saying that the Reagan Administration “granted more import relief to U.S. industry than any of his predecessors in more than half a century.” Chomsky goes on to note that, “in fact, it was more than all predecessors combined, as the Reaganites doubled import restrictions”.[1] Stiglitz observes that the US practices “corporate welfarism… under the guise of free market economics”.[2] The US may be the worst case, but the rest of the developed world is not very different.

As is likely apparent, Reagan did not institute protectionist policies for the benefit of the common citizens of the US. In fact, for them “rugged individualism” and “free enterprise” were in season. As a result, although not with the same magnitude, neoliberalism has had devastating impacts in the developed world just as it has had in developing countries.

The impacts of neoliberalism on the South are well understood and will not require revision here; however, it will be enlightening to look at its effects on the North in a bit of detail. Neoliberalism has been utilized “as an ideological weapon to discipline the defenseless” in the South, and has served the same function in the North. As protectionism is continually instituted in the interest of industry and finance, social security programs, unions, and consumer protection are being dismantled in the name of the market. This has resulted in the concentration of wealth in the hands of the elite few at an unprecedented rate, while incomes for common people have stagnated or even declined. Citing the work of economists Thomas Piketty and Emmanuel Saez, journalist Bill Moyers observes that

from 1950 through 1980, the share of all income in America going to everyone but the rich increased from 64 percent to 65 percent. Because the nation’s economy was growing handsomely, the average income for 9 out of 10 Americans was growing, too – from $17,719 to $30,941. That’s a 75 percent increase in income in constant 2008 dollars.

But then it stopped. Since 1980 the economy has also continued to grow handsomely, but only a fraction at the top have benefited. The line flattens for the bottom 90% of Americans. Average income went from that $30,941 in 1980 to $31,244 in 2008. Think about that: the average income of Americans increased just $303 dollars in 28 years.[4]

A short period after Bill Clinton took the office of president the Wall Street Journal explained that “on issue after issue, Mr. Clinton and his administration come down on the same side as corporate America.”[5] It seems the Democratic Party, conventionally seen to be of a populist leaning, behaves not much differently from the Republicans. This provides a good amount of insight into the condition of democracy in the country which sees itself as the “leader of the free world”. Although democracy was never as lively in the US as popular belief may suggest, as a result of neoliberalism it has been eroded almost to the point of non-existence. Deregulation of capital is a large reason for this.

The Bretton Woods system (which was in place from the end of World War II to 1971 when Richard Nixon suspended the convertibility of the US dollar to gold) encouraged free trade, but it insisted on regulation of capital. This allowed governments to institute policies characterized as those of a welfare state (e.g. progressive taxation, labour rights, environmental protection, etc.) without fear of capital flight. Today the threat of capital flight forces countries to compete in a race to the bottom with regards to populist policies. What deregulation of capital has also done is get in the way of free trade. The recent influx of speculative capital into the Brazilian economy is a case in point.[6] The high demand for the Brazilian Real led to appreciation in its value and thus lower demand for Brazilian exports.

The recent global financial crisis has led to many commentators issuing a death certificate to neoliberalism. Stiglitz, for example, has remarked that the housing bubble crash “was to market fundamentalism what the fall of the Berlin wall was to Communism”.[8] Despite such optimism in some circles, neoliberalism’s rule does not seem to be wavering. Right wing politicians, economists, and business elites have set in place too strong a foundation to overturn with ease.

Despite neoliberalism’s direct role in creating the financial crisis Toronto elected a mayor that could only properly be described as right wing nut; the Ontario Liberal government recently awarded corporate tax cuts worth $2.4 billion without causing much of a public outcry;[9] the May 2 Canadian federal elections will likely once again result in a Conservative minority, if not a majority; the state of Wisconsin recently elected a governor that is bent on taking away public sector employees’ right to collective bargaining. If anything, as recent developments such as the Tea Party movement suggest, neoliberalism’s grip on the public mind seems stronger than ever.

There are signs of hope, however. The last decade has seen a series of Latin American countries elect populist leaders who have curbed the influence of neoliberalism in the region. Also, the revolts currently taking place across the Greater Middle East are as much an indictment of neoliberalism as they are of Western-backed dictators. The conditions which sparked the uprisings – high levels of unemployment, poor working conditions, low incomes, food and energy price hikes, etc. – were the direct result of the economic liberalization that has taken place in the region and world.

Historian Mike Davis relates that we live in “a world in which the claims of foreign banks and creditors always take precedence over survival needs of the urban and rural poor; it is a world in which it is taken as ‘normal’ that a poor country like Uganda spends twelve times as much per capita on debt relief each year as on healthcare in the midst of the HIV/AIDS crisis.”[10] To change this reality we will have to come to understand that “the path to a world that is more just and free lies well outside the range set forth by privilege and power.”[11] The upcoming Canadian federal elections, for example, do not provide a path to a markedly different reality, no matter who is elected into power. Certainly within the given options there are better and worse choices, but the range available is very limited.

It is important to note that voting in elections is hardly an important part of being politically engaged. Democracy is not summed up in voting. Overcoming neoliberalism will necessitate a reimagining of citizens’ role in the democratic process; and fighting to expand the democratic space, in both political and economic spheres. In addition, as neoliberalism is an attack on the common people around the world, an internationalist approach will be required to counter it; the common people will have to come to know, Chomsky writes, that

international solidarity can take new and more constructive forms as the great majority of the people of the world come to understand that their interests are pretty much the same and can be advanced by working together. There is no more reason now than there has been to believe that we are constrained by mysterious and unknown social laws, not simply decisions made within institutions that are subject to human will – human institutions, that have to face the test of legitimacy and, if they do not meet it, can be replaced by others that are more free and more just, as often in the past.[12]

As for international development, the discourse around it has to move away from being about charity-giving in tone and instead look at the problems of the developing world through the prism of justice; additionally it has to be expanded beyond its current focus on economic development in the South to include an understanding of the development of democracy, liberty, and justice for all of humankind. Only in doing so can the economic development of the South be guaranteed, as its underdevelopment is directly the result of injustices carried out by the powerful, who are working to dominate us all (which is a fact that is conspicuously absent from mainstream development discourse). Globalization can come to have a humane meaning, and no longer be a euphemism for the subjugation of the planet by private capital. We can triumph over the current order, but much work remains to be done in order to do so.